Download - Meeting with Investors - November 2015
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TIM Brasil Investor Relations
TIM Brasil Company’s Presentation November, 2015
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TIM Brasil Investor Relations
TIM Brasil Investor Relations
Visit our website and download our IR app:
www.tim.com.br/ir
Agenda
About Us.......................................................................................3
Market Overview and TIM Positioning ...................................... 7
3Q15 Results…………………………..………………….…..…..…..….………..14
Quality & Network Evolution ……..……..…….…………………...…….24
Regulatory Update……….….….….………….………………………………...29
Industrial Plan 2015-17 ..….….….…………………..……………….………32
Appendix...................................................................................35
TIM IR app
(English)
TIM RI app
(Portuguese)
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TIM Brasil Investor Relations
TIM Brasil Investor Relations
74.6 million customers (26% Share)
More than 455,000 points of sales
179 own stores
15 Customer Care Centers (16k attendants)
~14,000 Antennas
3,449 cities covered
~61,200 km of optical fiber network
23,000 indirect jobs
~R$3.9 billion invested in FY2014 (ex-licenses)
Presence in Brazil since 1998
18th largest Private Company in Brazil*
Approximately R$20 billion of Market Capitalization
TIM: A Solid Path
Growth Via Acquisition
20
25 28
30 29
2010 2011 2012 2013 2014
CAGR+68%
Gross Revenues (R$ bln)
Data Users (mln customers)
EBITDA (R$ bln)
4.2 4.7
5.0 5.2 5.5
2010 2011 2012 2013 2014
CAGR+9%
CAGR+7%
Urban Population Covered: 81% in 3G and 48% in 4G
~13k employees
*Source: Exame Magazine - 2015
2nd in Market & Revenue Share
3
18 21
27 34
2010 2011 2012 2013 2014
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TIM Brasil Investor Relations
TIM Brasil Investor Relations Corporate Social Responsibility
Joined UN Global Compact in 2008
Member of ICO2 (Efficient Carbon Index) for 5 consecutive years
ISO 14001 certified since 2010, 1st Brazilian telco
Sustainability Member of ISE
(Sustainability Index) for 7 consecutive years
TIM Stands out in Sustainability
Founded in July, 2013
MISSION: We are committed to creating and strengthening resources and strategies for the democratization
of science and innovation that promote human development in Brazil, with mobile technology as one of the
main facilitators.
In public schools
84,000 children and 2,700 professors
In museums and science and technology centers
More than 70,000 people
In public administration
Participatory Urban Caretaker
o 4 municipalities
Cultural maps
o 7 municipalities and RS & CE government
In the federal institutions of professional and technological education
TIM Tec
o MOOC platform
Partnership with 5 federal institutes
Commitment with the 2014-16 Social Investment Plan: R$45 million
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TIM Brasil Investor Relations
TIM Brasil Investor Relations
Statutory Audit Committee:
• Report to Board of Directors
• Oversight Financial reporting
• Analyze anonymous complaints
Compensation Board and Internal Control and Risk
Board operate indefinitely and act independently
Whistleblower channel website:
www.tim.com.br/canal-denuncia
Corporate Governance
Brazilian Law “Lei das S.A”
Legal Requirements
Demand for transparency
and disclosures
Highest level of Corporate
Governance Requirement of protection for
minority shareholders
Unique Telco company listed on the Novo Mercado
Committees to Reinforce and Guarantee Solid Corporate Governance
10 members (3 independents)
3 members (1 independent)
3 members (3 independents)
3 members
5 members (2 independents)
7 members
Equal rights: vote, dividends and tag along
Higher liquidity
• Single class of share (ordinary shares)
Greater independence of Board of Directors (at least 30%)
Strict disclosure policy
Market Overview and TIM Positioning
TIM Brasil Investor Relations
7
The industry mobile revenue represented 56% of the total industry
revenues in 2014
Mobile Fixed Fixed BB Pay-TV Group
Customers 3Q15 (000´s) 72,573 540 220 n.a. 73,333
Market share 3Q15 26.3% 1.2% 0.9% n.a. ---
Net Adds 12M (000´s) -2,304 38 75 n.a. -2,191
Net Revs 3Q15 (R$ Mln) 3,948 169 4,117
ARPU 3Q15 16.4 n.a. n.a. n.a. ---
Mobile Fixed Fixed BB Pay-TV Group
Customers 3Q15 (000´s) 79,414 15,159 7,356 1,837 103,766
Market share 3Q15 28.8% 34.3% 28.9% 9.4% ---
Net Adds 12M (000´s) -409 -107 210 272 -34
Net Revs 3Q15 (R$ Mln) 6,286 4,295 10,581
ARPU 3Q15 24.3 n.a. n.a. n.a. ---
Mobile Fixed Fixed BB Pay-TV Group
Customers 3Q15 (000´s) 70,353 11,638 8,025 10,133 100,149
Market share 3Q15 25.5% 26.3% 31.6% 52.0% ---
Net Adds 12M (000´s) 717 235 728 -210 1,470
Net Revs 3Q15 (R$ Mln) 2,930 6,134 9,064
ARPU 3Q15 13 n.a. n.a. n.a. ---
Mobile Fixed Fixed BB Pay-TV Group
Customers 3Q15 (000´s) 49,462 15,453 6,426 1,171 72,512
Market share 3Q15 17.9% 35.0% 25.3% 6.0% ---
Net Adds 12M (000´s) -1,965 -1,250 -119 138 -3,196
Net Revs 3Q15 (R$ Mln) 2,048 4,779 6,827
ARPU 3Q15 16.7 n.a. n.a. n.a. ---
TIM represents 26% of the industry mobile revenue1
1 - Mobile revenue considers only the 5 major players. Oi numbers are adjusted to include corporate mobile
Source: Anatel and players’ financial statements
Mobile Revenues Share
Nextel Oi Claro TIM Vivo
Brazilian Telcos X-Ray
30,2% 30,6% 31,8% 33,1%
24,9% 25,5% 26,6% 26,4%
19,0% 17,5% 17,6% 17,9%
16,9% 18,3% 17,4% 16,5%
8,9% 8,1% 6,5% 6,1%
2011 2012 2013 2014
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TIM Brasil Investor Relations
TIM Brasil Investor Relations
24.5
58.8
07 08 09 10 11 12 13 14 15e 16e 17e 18e
R$0.40
R$0.02
07 08 09 10 11 12 13 14 15e 16e 17e 18e 19e 64
602
14 15e 16e 17e 18e 19e
Community Era
MTR
Stabilization
Reality Check: Transition Phase
Market
conditions
require a new
STRATEGY
Industry Evolution Path
Multiple SIM cycle
Prepaid segment to follow SIM card cycle
Data traffic booming
Data overcoming voice revenues by 2016
Expansion Consolidation
07 08 09 10 11 12 13 14 15 16 e 17e 18e 11 12 13 14 15e 16e 17e
Brazil Mobile Traffic (PB)
Mln customers
82 min
07 08 09 10 11 12 13 14 15e16e
Voice slowdown Avg Market MOU(min)
Source: Internal estimates and BofA ML Global Matrix
< 128 min
Data Era Transition
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TIM Brasil Investor Relations
TIM Brasil Investor Relations Commercial Strategy Evolution
o Volume Driven (market share)
o Base of Pyramid
o Offer Based on Community
o Handset leadership (focus on volume)
o Mass Channels
o Mobile + B2C
o Value Driven (value share)
o Big Middle of Pyramid + Value Clients
o Bundle of Voice + Data + Off-net
o Handset Support (focus on value)
o Value Channels
o Mobile + B2C + B2B + selective convergence
15 16 17 18 19
OLD go2market
NEW go2market
NEW PORTFOLIO
MODEL
Voice + data bundles
On-net + off-net voice
Recurring billing
Customer spending concentration
Protection of data value
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TIM Brasil Investor Relations
TIM Brasil Investor Relations New Offer Details on Pre and Control: Throw 2nd SIM Away
SIM card consolidation leveraging on off-net offering
“Fair value” on data offer
Coherent with customers current total spending
Only ONE SIM Card
100 min to all operators - Local & LD
150 MB of data
SMS to all operators
R$7.00 7 days
500 min to all operators - Local & LD
SMS to all operators
1GB of data
New Control Plan New Prepaid Plan
R$50.00 month
Higher value alternative at R$10 (300 MB) Additional price points at R$35 (500 MB) and R$70 (1.5 GB)
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TIM Brasil Investor Relations
TIM Brasil Investor Relations New Offer Details on Postpaid: Tackling High Value Game
Freedom to use On & Off net calls
Best value for money postpaid offer in Brazil
1,000 min to all operators - Local & LD
SMS to all operators
R$99.00 month
New Postpaid Plan
Preserving data value and monetization (rightsizing data price points)
Higher value alternatives at R$139 (4GB) and R$169 (6GB)
No roaming charges
2GB of data
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TIM Brasil Investor Relations
TIM Brasil Investor Relations New Positioning for a New Reality
Strategic Goals
Adjusting to Challenges
o Infrastructure as key enabler to resume growth
o Recover innovation and disruptive positioning (first mover advantage)
o Defend voice & maintain data acceleration to rebound revenues
o Better data monetization
o Leverage on Opex efficiency to sustain EBITDA and expand margin
Situation Recap
o Mobile market reaching maturity
o Community effect slowdown
o SIM Card consolidation (massive prepaid disconnection)
o MOU sharp reduction
o Voice revenues decline overcoming data growth
o Getting near the final stage of MTR relevant impact
Actions to Date
o Repositioning in Network Quality
o Liberty Top
o 50MB/day allowance
Actions Moving Forward NOW!
o New Portfolio
R$7.00/week
R$50.00/month
R$99.00/month
3Q15 Results
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TIM Brasil Investor Relations
TIM Brasil Investor Relations
A Tough Year
TIM Current Position
Short term Revenue challenges, but focus on Infrastructure,
Data and Efficiency continues Consumer confidence
Inflation
FX Rate
Unemployment
Reducing but Still Significant Exposure to MTR
Offer based on community
Main Messages
9.8%
R$3.86/US$
8.7%
Bytes of Use
+30% YoY
Minutes of Use
-13% YoY
Prepaid 81%
Postpaid 19%
16%
8%
3Q13 3Q15
Industry Reshaping
Data Revenues
+41% YoY Efficiency / Opex
-20% YoY
EBITDA Margin
31.5%
Service Revenues
-6.5% YoY EBITDA
-2.7% YoY
Costumer Mix Improving
75.7 pts (-25% YoY)
Source: ICC – FGV Oct; Central Bank of Brasil; Bloomberg; IBGE; Anatel and Company
+
-
TIM’s Results
3Q14 to 3Q15 Building Infrastructure
+22% YoY CAPEX
3Q14 3Q15
+13%
3Q14 3Q15
-6%
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TIM Brasil Investor Relations
TIM Brasil Investor Relations
3Q14 3Q15
~44% ~63%
3Q14 3Q15
Smartphone Penetration
Strong and Resilient Data Performance
Innovative Data Net Revenues (R$mln; % YoY)
Bytes of Use (MB; % YoY)
4G Users (mln users)
Data ARPU* (R$; %YoY)
3Q13 3Q14 3Q15
Data connectivity
Content & Others
602
1,214
+18%
+41%
+34%
+2x
340
443
3Q14 3Q15
1,363
5,050
3Q14 3Q15
*Innovative Services
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TIM Brasil Investor Relations
TIM Brasil Investor Relations Live TIM: Another Milestone - 200k Subscribers
Keeping 1st place in the Netflix ISP Speed Index 1 st
Quality Recognitions
Customer Base (thousand customers; % YoY)
Share of Net Adds (SP and RJ >34 Mbps)
1 st
1 st
1 st
Best Broadband quality in the Perceived Quality Survey done by Anatel
Best broadband in the country by “Estadão” newspaper ranking
Most recommended brand by CVA Solutions Institute
23%
34%
63%
41%
13%
23%
0.1% 0.5% 3Q14 3Q15
120
200
3Q14 4Q14 1Q15 2Q15 3Q15
+67% TIM
P1
P3
P4
Source: Anatel *July and August
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TIM Brasil Investor Relations
TIM Brasil Investor Relations
9M14 9M15
Corporate Solutions Evolving
• Focused convergence approach
• Hybrid channel: direct and indirect
• Reverting MNP figures to +
• Multi-channel approach
• Focus on offers and customer experience
• Integrated Fixed+Mobile approach
Winning in large customers -
e.g. Estácio and MRV
9M14 9M15
Fixed Sales (R$)
Mobile Sales (Gross adds)
Data
Voice
TOP
PME PME
ENTERPRISE
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TIM Brasil Investor Relations
TIM Brasil Investor Relations
4,045 3,784
+34% -15% -39% +11%
4,853 4,117
-59% -6.5%
Tho
usa
nd
s
Total Net Revenues (R$ mln; %YoY)
Service Net Revenues (R$ mln; %YoY)
Revenue Dynamics: Data Progress Continues
3Q14 3Q15 Handsets Service Net Revenues
-15%
Innovative Revenues Growing Relevance (Mobile Service Net Revenues mix)
23% 34%
8% 5%
69% 61%
3Q14 3Q15
Change in business model FX depreciation Less purchase power Move to higher value
channels
-6.5%
3Q14 3Q15 Innovative Fixed Traditional Incoming
Outgoing
Traditional + Incoming
Innovative
SMS
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TIM Brasil Investor Relations
TIM Brasil Investor Relations
Accelerating Short Term Savings, While Working on Structural Efficiency
Opex Performance (ex towers sale) (% YoY)
Efficiency Initiatives in All Fronts in Q3 (% YoY; Δ R$mln YoY)
Efficiency Plan Update
Jan/15 Dec/17
R$ 1 bln
Selling & Marketing
Bad Debt
G&A
ITX & Network
COGS
Personnel Expenses
8.8%
-8.1%
-19.9%
3Q13
3Q14 3Q15
-10%
-15%
-52%
-10%
+1%
+9%
Sep/15
+3.3% -8.8% -9.7% Ex-COGS
~ 1% on Revenues
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TIM Brasil Investor Relations
TIM Brasil Investor Relations Efficiency Plan in course
More than R$1 bln in 3 years (sum of savings in 2015, 2016 and 2017)
Further evolution of current cost control initiatives
Focus on systems, platform and business model
Optimization/ Control
Strategic Sourcing
Rightsizing
Process Engineering
Business Model
PxQ based on benchmarking Strong spending control Rationalization of low priority/discretionary activities
Supplier portfolio rationalization Remuneration review Contracts renegotiation
Internal processes review, activities rationalization, efforts optimization, rightsizing, etc.
Cross-functional optimization Company-wide E2E processes
Changes on business and operational models, policies, and rules, etc.
Breakthrough initiatives
Complexity Impact
Focus on Margin
Improvement
Low
High
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TIM Brasil Investor Relations
TIM Brasil Investor Relations
1.332 1.296
267
27% 31%
3Q14 3Q15
1.086 776
820
9M14 9M15
Defending EBITDA with focus on Margin
Net Income (R$ mln; %YoY)
Net Debt (R$ mln)
7,331
2,502
4,829
Debt Cash &Securities
Net Debt
Towers Sale Impact
EBITDA & Margin (R$ mln; %YoY)
Service EBITDA & Margin (R$ mln; %YoY)
-2.7% -0.3%
Recent cash outs (R$): 4G in 4Q14: 1.68bln 4G in 2Q15: 0.37bln Capex > 0.66 bln YoY
0.46x Net Debt/LTM EBITDA
-28.6%
Towers Sale
Towers Sale
Towers Sale
Margin ex-towers
sale
Margin ex-towers
sale
1.378 1.374
267
34% 36%
3Q14 3Q15
R$ mln 1st closing 2nd closing
#Towers sold 4,176 1,125
EBITDA +918 +267
Net Income +636 +184
Cash +1,897 +517
Debt -977 -230
NFP +921 +286
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TIM Brasil Investor Relations
TIM Brasil Investor Relations
BNDES 49%
Leasing¹ 19%
BEI 17%
Others 15%
-152 -421
1,274
2,502
2012 2013 2014 3Q15
12.11%
14.18%
2011 2012 2013 2014 3Q15
Net financial position details - Cash & Debt Evolution
Short term debt
Better Profile: Less Short Term Debt
Debt by Lender in 3Q15 (% of gross debt; post hedge)
Debt Position (R$ mln; % of total debt in short term)
Cash Position (R$ mln)
5,233
Comfortable liquidity margin 20% 21% 21% 23%
Higher cash yield and debt cost due to CDI increase in the period Bigger gap between cash yield and debt cost due to smaller cost of
new loans
Δ: 120 bps
Cash Yield vs. Debt Cost (% per year)
Net Financial Position (R$ mln)
Δ: 114 bps Cash yield
Debt cost
Net debt/
EBITDA 12M 0.23x -0.08x -0.03x 0.46x
4G: -2,048 Towers: +1,207 Net effect: -841
¹ Leasing from Tower Sale + LT Amazonas
4,431
5,288 5,233 4,829
2012 2013 2014 3Q15
4,279 4,867
6,507 7,331
2012 2013 2014 3Q15
Quality and Network Evolution
24
TIM Brasil Investor Relations Better Capex Allocation: Focus on 4G
New Investment Plan 2015-17 (R$ billion; % YoY)
~11.0
>14.0
2014 Plan(3 yrs)
2015 Plan(3 yrs)
+27%
2014 Actual 2015 Bdg 2016 Plan 2017 Plan
Technology Capex Allocation
2G
3G
4G
2014a 2015e 2016e 2017e
Traditional
9M14 9M15
2,617
3,276
Investments in the Growing Business (R$ million)
Capex Distribution - 9M15 (R$ million)
Licenças &Outros
TransmissãoLive TIM2G3G + 4G
Access: 65% of total Capex
Innovative
Transmission License & Others
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TIM Brasil Investor Relations
3,583
5,556
9,920
11,814
4Q14 3Q15
36%
48%
58%
79% 81% 82%
4Q14 3Q15 4Q15e
Infrastructure as a Stepping Stone to Growth
Coverage: Fast Expanding 3G/4G
Urban Pop. Covered (%) # of Sites
# of Cities with 4G Coverage:
December/14 October/15
+233 cities
+19%
+55%
4G
3G
4G
3G +2pp +300 cities
+12pp
100+ mln people
Rio de Janeiro Curitiba Brasília Manaus Natal São Luiz
Innovative Coverage
4G: LARGEST coverage of the country
45
140
100
TIM
Player 1
Player 3
278 TIM
Player 1
Player 3
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TIM Brasil Investor Relations
3T14 3T15
3T14 3T153T14 3T15
Quality and Cost Efficiency
Mobile Broadband Project Evolution
173
83
3Q152Q151Q154Q143Q14
(# of Cities with MBB)
~70% of Total Data Traffic
HetNet Sites (# of wifi hotspots and small cells - 3G/4G)
2014 3T15 2015Wifi Small Cell
BackBone (000 Km; YoY)
+16.5
Sites Connected with Fiber (%YoY)
+37%
Leased Lines Cost (R$ million; %YoY)
-15%
3Q15
3Q14 3Q15 3Q14 3Q15
3Q14 3Q15
27
TIM Brasil Investor Relations A Better Customer Experience Use
¹ Measures connection speed at any given time above Anatel’s target. ² Average connection speed registered within the month.
Both indicators refers to country average weighted by customer base.
Instant Speed (SMP10)¹
Average Speed (SMP11)²
94% 96%
jul/14 jul/15
87% 94%
jul/14 jul/15
Throughput DL (KBPS)
Latency (MS)
S1 S2 S3 S4 S1 S2 S3 S4 S1 S2 S3 S4 MAY JUN JUL
S1 S2 S3 S4 S1 S2 S3 S4 S1 S2 S3 S4 MAY JUN JUL
TIM MARKET without TIM
Data Accessibility (3G/4G)
Data Drop (3G/4G)
96%
100% 100%
jul-14 jul-15
3G 4G
89%
100% 100%
jul-14 jul-15
Voice Accessibility Voice Drop
100% 100%
jul-14 jul-15
Number of states within target; Source: Anatel
100% 100%
jul-14 jul-15
2G+3G data: charts made by TIM through report analysis NetMetrics provided by SpeedTest.net
Regulatory Update
29
TIM Brasil Investor Relations
TIM Brasil Investor Relations Spectrum – Caps and Distribution
25
25
0
24
19
0
9
16
25
25
0
25
10
5
5
5
5
5
2
5
5
5
2
5
5
5
5
5
5
5
5
5
20
20
30
45
21
21
26
39
40
40
29
20
25
25
25
40
21
21
42
36
30
30
20
20
22
30
25
22
23
30
27
20
20
20
30
30
30
30
20
20
20
40
40
20
20
40
40
20
20
40
40
20
20
40
40
20
20
40
40
20
0
20
20
20
0
20
20
20
0
20
20
20
0
20
20
20
0
20
20
20
0 20 40 60 80 100 120 140
Northeast
South
North
Southeast
Midwest
135
138
69
110
140
140
75
140
113
88
70
110
137
135
140
115
76
116 0
137
140
1,800 MHz
900 MHz
850 MHz
2,500 MHz
2,100 MHz
0
0
0
0
0
700 MHz
6
25
15
Band 850 MHz 900 MHz 1.800 MHz 2.100 MHz 2.500 MHz 700 MHz
Regulated Spectrum Cap (FDD Applications)
(12.5+12.5) MHz
(2.5+2.5) MHz
(25+25) MHz
(15+15) MHz
(30+30) MHz
(20+20) MHz
Global Cap of 80 MHz < Σ of Sub-Caps Specific Caps
Current cap
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TIM Brasil Investor Relations
TIM Brasil Investor Relations Main regulatory topics for 2015
2Q15
April May June / July
3Q15
August September
• Small Cells (Law n. 13,097/2015): full exemption of TFI/TFF (FISTEL) to Small Cells with <5W power and reduction of 90% to 5-10W power. • Fistel Adjustments: Proposal of the Ministry of Finance to increase by 189% TFI / TFF (Fistel) stations / access. Sectorial actions with the Ministries. • Speed reduction vs. Service Interruption after full data package usage: Public Commitment published on 4/23/15, including educational campaign
and code of conduct. • Terms of Conduct Adjustment (TAC): to be signed before Nov/15. • “Banda Larga para Todos” (Broadband for All): Government program under construction. Goals by 2018: 300 mln of broadband internet accesses,
speed of 25Mbps, 40 thousand schools and 23 thousand Public Health Centers (basic care) covered with high capacity broadband. • STFC concession: Possible revision of the current model (to culminate in anticipation of its closure, scheduled for 2025), with regulatory review of
universal and reversible assets. • Auction of leftover spectrum: expected to occur in Dec/15. The auction includes remnants of the 2.5 GHz band not sold in the 4G auction in 2012 and
the sale of the 1.8 GHz band in the metropolitan region of Sao Paulo, which was occupied by the now defunct Unicel.
Network Neutrality (ANATEL) • End of Anatel’s PC about the
network neutrality regulation (MCI 9th art.).
Network Neutrality (MJ) • Public Consultations (PC) from
the Ministry of Justice about network neutrality regulation in the “Marco Civil da Internet” (Brazilian Civil Rights Framework for the Internet).
Antennas Law • Law n. 13,116/15 published, that
unifies antenna installation requirements nationwide.
Regulatory Agenda • Publication of the PC about
Anatel’s Regulatory Agenda for 2015-2016 biennium.
Personal Data • Contributions to the PC of the
Ministry of Justice about the Preliminary project of the Personal Data Project Law.
Groups with SMP • ANATEL conducts PC to review
Groups with Significant Market Power in PGMC markets.
655/2015 Res. • Published Reg. for acquisition of
National Products (obligations fulfillment).
Antennas Law • Discussion on the Bill of Law minutes
for urban and licensing rules.
Digital TV Ads • Beginning of campaign about the
Analog TV switch off (Rio Verde/GO).
Public notice of Leftovers • PC for 1,800, 2,500 and
3,500 MHz bands authorization auction.
Radio Frequency • Res. 454/2006 revision. • PC to allow 900 and 1,800
MHz bands auction. 700MHz • Beginning of Digital TV
converters distribution in Rio Verde /GO for “Bolsa Família” beneficiaries.
Industrial Plan 2015-17
32
TIM Brasil Investor Relations
TIM Brasil Investor Relations
48% 40% 37% 35%
52% 60% 63% 65%
2014a 2015e 2016e 2017e
Innovative
Traditional
24%
12%
31%
18%
2010 2011 2012 2013 2014 2015e 2016e 2017e
Net Services Revenues Exposure (%)
EBITDA Exposure (%)
MTR Cut (% YoY)
2013a 2014a 2017e
Innovative: Data Content Other
Traditional: Voice Incoming SMS
+48%
-11%
% YoY
Near mid-single
-44%
~5 bln
~9 bln
Business transformation at TIM
-35% -33% -25% -11% -15%
Mobile Net Revenues Analysis (R$; % YoY)
Innovative and Traditional Investments (R$; % YoY)
Capex Plan: >14 bln of Reais in 3 years
MTR Incidence Estimates
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TIM Brasil Investor Relations
TIM Brasil Investor Relations Capex allocation: quality to increase returns
MBB Project Geographic Area
Small Cells
New Macro Sites
WiFi / Femto / DAS 3,000 WiFi in 2015 >150 DAS in 2015
1,137 cities prioritized due to business relevance, based on IRR and Payback
HetNet
% of Urban Covered Population
MBB program is addressing >70% of TIM's business, and is the key investment program in 2015-2017
High business concentration in few cities allows for a focused infrastructure enhancement program
1.9k 3.7k
>15k
2013a 2014a 2015e 2016e 2017e
Number of 4G Sites
9.1k 10.4k >14k
2013a 2014a 2015e 2016e 2017e
Number of 3G Sites
0.7k 1.5k
5k
2013a 2014a 2015e 2016e 2017e
Number of Wifi & Small Cells
2G
3G
4G
95% 95%
78% 79%
27%
86%
2013a 2014a 2015e 2016e 2017e
Network Rollout New Coverage Strategy
TIM LD Backbone
1.4k
3.9k
2015e 2017e
New Small Cells
0.8k
3.5k
2015 2017
+2.8x +4.3x
2009 2017
~15,000 Km ~60,000 km
Appendix
35
TIM Brasil Investor Relations
TIM Brasil Investor Relations Mobile Base Analysis
Source: Anatel (most recent data available)
3G 4G
Market Share Net Adds Share Mobile Customer Base (in 2014)
Market Share per Technology
Nextel Oi Claro TIM Vivo
26.9% 26.4%
24.6% 25.2%
29.6% 29.3%
18.7% 17.8%
17, 0%
19, 0%
21, 0%
23, 0%
25, 0%
27, 0%
29, 0%
2Q12 2Q13 2Q14 2Q15
31% 26%
18%
75%
25% 25%
0,0 %
10, 0%
20, 0%
30, 0%
40, 0%
50, 0%
60, 0%
70, 0%
80, 0%
2Q12 2Q13 2Q14 2Q15
82% 64%
78% 82% 75%
18% 36%
22% 18% 25%
TIM Vivo Claro Oi Industry
Pré Pós
29.2%
23.4% 24.4% 25.5%
30.4% 24.4% 25.5% 25.5%
31.4%
40.2% 35.1% 32.1%
8.4% 11.2% 13.7%
15.3%
2Q12 2Q13 2Q14 2Q15
46.8% 39.2% 39.5%
20.2%
30.3% 29.0% 20.7% 20.0%
18.1% 12.3% 10.2%
10.7% 0.0% 0.3% 2.8%
2Q13 2Q14 2Q15
Pre Post
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TIM Brasil Investor Relations
TIM Brasil Investor Relations
26.6%
47.9%
18.2%
4.9%
2.3% 4.8
10.0
98.2
54.6
37.3
Average Household Income
Brazil’s Specifics
MEN WOMEN Age
2020: 213 mln 2010: 196 mln
0 to 4 5 to 9
10 to 14 15 to 19 20 to 24 25 to 29 30 to 34 35 to 39 40 to 44 45 to 49 50 to 54 55 to 59 60 to 64 65 to 69 70 to 74 75 to 79 80 to 84 85 to 89
>90
10 10 5 5 0 Million
+13 mln
Source: IBGE
Population by Social Class & Income Profile Age Pyramid (million people)
Brazil Facts
8.5% of Brazilian above 15 years are illiterate
30 mln people still live in the rural areas
5.8% of the cities accounts for 75% of GDP
Brazil is in the 7th position in terms of GDP
A
B1
C
D/E
B2
Note: New criteria from Abep adopted after 2014 Souce: IPC Maps 2015
R$20,273
R$8,696
R$4,427
R$1,910
Total of Individuals (E)
(MM)
Household Distribution by
Social Class
Average Brazilian Household Income: R$2,794
R$640
37
TIM Brasil Investor Relations
TIM Brasil Investor Relations
14.25
10.00
11.75
14.25
12.9
2013a 2014a 2015e 2016e
(1.2)
1.0
2.8
0.2
(2.8)
(0.9)
2013a 2014a 2015e 2016e
• Consensus expects a deterioration in overall macroeconomic scenario on the short term
• Market consensus still project GDP contraction in 2016
• Market expects government to push inflation to the upper limit of the inflation band
• With inflation and FX Rate going up, SELIC is expected to keep at current levels and starts to drop only by 2016
Source: IBGE for actual figures and Central Bank Focus Report of May 29th, 2015 for estimated figures
GDP Forecast (% YoY growth)
Inflation Forecast (IPCA: 12 months)
Interest Rate Forecast (% Selic Target p.y. – year end)
FX Rate Forecast (R$/U$ - end of period)
Macro Scenario Outlook
9.5
5.3
6.2 6.3 8.8 6.5
2013a 2014a 2015e 2016e
3.9 3.9
2.4 2.7
4.0 4.1
2013a 2014 2015e 2016e
Market Consensus
Government Target
Market Consensus
Government Target
38
TIM Brasil Investor Relations
TIM Brasil Investor Relations
Tax Burden Composition (% Gross Revenues)
Cofins PIS/ PASEP ICMS Fistel Fust/
FUNTEL
TotalTotal Fust/ FUNTEL
PIS/ PASEP
ICMS Cofins Fistel
3% ~1%
28%
~5% 1.5% ~39%
Taxation represents almost 40% of companies gross revenues
Source: players Balance Sheet
2 Considers TIM, Telefonica, Oi and AMX
45.7 46.0
2012 2013
Tax Burden
Telecom Industry Tax Payments2
(R$ bln)
Tax Burden over Net Revenues (over mobile phone services - voice)
Source Teleco study of July 2014
39
TIM Brasil Investor Relations
TIM Brasil Investor Relations Balance Sheet Analysis
Short term
TIM’s Debt Composition
Price/Book Value
Source: Bloomberg *Estimated
2015 2014 2013
Long Term
Price/Earnings
Accounts Receivable Turnover (days)
Payable Turnover (days)
12.8%
13.4%
11.9%
10.3%
8.7% 8.5%
10.5%
10.7%
8.4%
2012 2013 2014
10.8%
10.6%
10.3% 10.1%
8.5%
11.2%
5.5%
9.9%
6.6%
2012 2013 2014
7.8% 7.4%
6.8% 6.8% 5.6% 5.6%
4.6% 5.3% 4.6%
2012 2013 2014
TIM
VIVO
OIBR
Market Average
ROE (Net Income/Shrd. Equity) ROA (NOPAT/Total Assets) ROIC (NOPAT/Invested Capital)
1Q 2Q 3Q 4Q
47
43 44
3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15
123 147 149
3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15
1.6 1.1 1.3 1.0
0.7
3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15
16.0 14.7
6.2
14.0 12.2
3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15
40
TIM Brasil Investor Relations
TIM Brasil Investor Relations Quarterly Historical Data
41
TIM Brasil Investor Relations
TIM Brasil Investor Relations Annual Historical Data
42
TIM Brasil Investor Relations
TIM Brasil Investor Relations Historical Data: Operational
43
TIM Brasil Investor Relations
TIM Brasil Investor Relations
Stock Performance (base 100)*
*Last price as of 10/31/2015 Source: Bloomberg
Structure and Stock Performance
Shareholders Structure
Treasury Shares: 795,888 (0.03%) Total Shares: 2,421,032,479
IBOV -16% TIMP3 -37%
TSU -60%
20,00
40,00
60,00
80,00
100,00
120,00
140,00
TIMP3 Ibovespa TSU
44
TIM Brasil Investor Relations
TIM Brasil Investor Relations
Investor Relations Team
Avenida das Américas, 3434 - Bloco 01
6° andar – Barra da Tijuca
22640-102 Rio de Janeiro, RJ
E-mail: [email protected]
Rogério Tostes
E-mail: [email protected]
Phone: +55 21 4109-3742
Vicente Ferreira
E-mail: [email protected]
Phone: +55 21 4109-3360
Leonardo Wanderley
E-mail: [email protected]
Phone: +55 21 4109-4017
Rodrigo Godoy
E-mail: [email protected]
Phone: +55 21 4109-3446
Luiza Chaves
E-mail: [email protected]
Phone: +55 21 4109-3751
Visit our Website
www.tim.com.br/ir
Statements in this presentation, as well as oral
statements made by the management of TIM
Participações S.A. (the “Company”, or “TIM”), that are
not historical fact constitute “forward looking
statements” that involve factors that could cause the
actual results of the Company to differ materially from
historical results or from any results expressed or
implied by such forward looking statements. The
Company cautions users of this presentation not to
place undue reliance on forward looking statements,
which may be based on assumptions and anticipated
events that do not materialize.
Safe Harbor and IR Contacts
Safe Harbor Statements